From the May 2009 issue of Investment Advisor • Subscribe!

May 1, 2009

The Psychology of Advice: The Madding Crowd

Here are some measures to calm things down

When bad things are happening to people all over the world, stress reactions start to run the show. Panic, rage, conspiracy theories, and other forms of catastrophizing proliferate. The reptile brain is in charge. As evidence, I cite the recent behavior of my own husband. Michael, the calmest and sanest person I know when it comes to money, has been sliding in and out of what might be called controlled panic. What he says (I know you're probably hearing and feeling this yourself) is, "I try to stay calm and remind myself that we're still okay, but I don't know how to predict what will happen next. I planned for the worst-case scenario, but this is so much worse that I can't even imagine how bad it could possibly get."

I'll wager that more of your clients are exploding in anger, dissolving in tears, or launching into tirades on topics that once would have seemed over the edge--for example, insisting that the market crash has been contrived by well-funded jihadists who are making obscene profits betting against the West. Some clients probably blame you for the sorry state of their finances, if not for the entire worldwide economic collapse.

Rick Kahler of Kahler Financial Group in Rapid City, South Dakota, told me that one client attacked him hotly about the decline in her portfolio and her other assets, complaining that his "fees were too high, returns terrible, [and she] found no value in financial planning. I snapped and suggested she terminate since she was so unhappy with me." Kahler, whom I would unhesitatingly term one of the leading therapeutic educators in the financial advisor community, added with wry self-deprecation, "This is from the guy who's co-authored how many books on how to 'be' with clients."

He contacted the client soon after this meltdown. "She said she had no intention of terminating me, so I suggested we start over." Altogether, he says, "I've been fired by six clients since December. Four are still clients."

If you're having difficulty managing versions of controlled panic in your clients (or yourself), take note of the situations below. They may suggest ways to cope with this pervasive atmosphere of frustration, anger, fear, and even despair.

Q: A longtime client has given me discretion over $2 million, which I invested in a balanced portfolio. Last year his investments were down 18%. Not bad, considering--but his brother-in-law claims to have an advisor who produced a 10% return last year, as he supposedly has done with amazing regularity for years. I find it hard to believe that anyone could produce a 10% return in 2008, but questioning his brother-in-law's veracity (or this advisor's honesty) could cost me a very valuable client and possibly damages in a lawsuit. Help!

A: You have good instincts in hesitating to openly question your client's brother-in-law or his advisor. But you can use the power of stories, which have the ability to open our unconscious up to other ways of seeing reality, in order to make your point.

First, take ample time to listen to your client express how upset he is about his shrinking portfolio, and share with him your own perceptions, thoughts, and feelings about it. Then I'd suggest telling a few stories (which you might attribute to other people) about trusted advisors who claimed consistently higher returns before being unmasked as frauds. Bernie Madoff is the most egregious example that springs to mind, although there are certainly others. The more stories you can tell where the moral is "if it sounds too good to be true, it probably is," the more you'll weaken your client's attraction to a scheme that could end up adding betrayal to his terrible financial loss.

Of course, he may react so obstinately or defensively that you're tempted to blurt out, "Good riddance, then! Go put your money with this crook and see how far it takes you!" If so, I'd step waaaay back, breathe deeply, and count to a hundred (or do your own form of stress relief). Remind yourself that your client's longing for a magical solution has more to do with the impact of his losses than an attack on your competence or your character.

Q: This may sound wacky, but bear with me. One of my biggest clients, whom I suspect of being a racist, is convinced that President Obama is a pawn of a worldwide left-wing conspiracy to redistribute wealth in America. He believes the financial crisis was engineered to allow these socialists to make their move. I've never had a problem keeping politics, religion, and race out of money management discussions before, but now I feel like I'm groping through a minefield. How can I find my way out?

A: Oh, boy. I'd take some time to reflect on your relationship with this client, and decide whether you want to keep working with him. If you feel reluctant to serve a client whose worldview is so dramatically different from your own, you might refer him to a planner whose outlook is closer to his.

On the other hand, you may decide that there are aspects of the relationship you like and value, or you simply can't afford to let him go. In this case, think about ways to deflect the conversation away from his "wacky" views and back to what you consider sensible and productive dialogue. You might say something like this: "Since it's impossible to know President Obama's deepest motivations, let's focus instead on your own goals and desires, which we can ascertain and plan for, and see what changes we need to make in light of current developments in the economy."

Or you could take an even more radical stance: "Suppose you're right about this. Let's look at what we need to do with your portfolio if the worst happens and the wealthy get a lot less wealthy in the years to come." (This could happen irrespective of any socialist manifesto, so planning for it may be the right thing to do anyway.)

Whenever I've had therapy clients whose political views differ from mine, the relationship works fine unless they start haranguing me about their opinions. This always tests my patience and my ability to do good work with them. If your client's tirades get on your nerves to the point where you're about to lose your temper, do what's necessary to calm yourself, and then tell him (as gently as you can) that you prefer your office to be a politics-free zone. Suggest that the two of you don't have to see eye to eye on the state of the nation in order to develop a plan that works for him.

Good luck in navigating this client's fears, biases, and far-out perceptions of reality! Continuing your relationship with him will definitely be a challenge unless you can artfully deflect his extreme political statements.

Q: A number of my clients are not just depressed about their portfolios and their ruined plans; they're really angry. They're mad at the Wall Street firms and big banks for getting us into this mess, they're mad at people like Madoff and the guy from Stanford Financial who have ripped off so many people and still haven't paid for what they did, and they're mad at me for not protecting them from the market's collapse. All this anger is taking its toll on me. How can I turn it into something more positive and productive?

A: This is a great question, and one I know many other advisors must be asking.

The first and most important thing is to see if you can react less emotionally to your clients' feelings. Make some time to reflect on how you feel about and deal with anger. While you were growing up, did people in your family express anger, or did they suppress it? Were there violent outbursts of anger that traumatized you in any way? Were you conditioned to avoid showing your own anger at all times?

Once you understand your feelings and behavior around this charged emotion, you may be able to think of ways to deal better with angry clients. Learning to calmly withstand a moderate amount of venting from clients is an important part of being a therapeutic educator, but I emphasize the phrase "a moderate amount." No one needs to put up with intense dumping of negative feelings. That's close to abusive. If we respect ourselves, I think we all need to set limits on what we are willing to tolerate from others.

I empathize (as I imagine you do) with your clients' anger toward the greed and corruption being uncovered in this financial upheaval. It's important to listen to their anger and dissatisfaction for a while, and by all means share your feelings with them so they feel less alone. But you also need to protect yourself. A technique I've used successfully is to imagine myself surrounded by a protective membrane of golden light particles that blocks other people's negativity. This allows me to hear and respond to clients without being overloaded with their pain, fear, or anger. Another tip is to focus on your breathing if a stressful confrontation threatens to pull your own trigger. Getting back to more centered breathing will help you withstand whatever comes up.

That said, I think it's a good idea to distinguish between clients who just want to beat you up, and those who need to rant and rave for a short time before moving on to resume a more productive dialogue. If they fall into the category of persistent hotheads and finger-pointers, you may have to step in forcefully and invite them to turn to what they (and you) can control: their spending, their lifestyle choices, their spiritual nurturing, their creativity, their human connections. One planner told me that when clients are feeling powerless about their shrinking portfolios, making even a small change in spending habits (like giving up daily lattes) can go a long way toward helping them feel more positive and in control.

If your clients can't get on board with this, you might propose that they work with someone else toward whom they don't feel this backlog of anger. This suggestion may wake up some clients who didn't realize how stuck they were in a vicious circle of rage and recrimination.

When clients come to you bristling with anger, suspicion, panic, and catastrophe scenarios, you can lessen the intensity of these emotions by creating a safe place to hear them. For those who are trapped in a vicious circle of wrath, it's vital to gently redirect them to sources of creativity, connection, hope, and healing. By exploring your own weaknesses and reactions in the face of negativity, and remembering to breathe deeply and protect yourself, you'll be better able to model good stress management and be a calm center in the eye of this economic storm.


Olivia Mellan, a speaker, coach, and business consultant, is the author with Sherry Christie of The Client Connection: How Advisors Can Build Bridges That Last, available through the Investment Advisor Bookstore at invest-store.com/investmentadvisor. She also offers money psychology teleclasses for financial advisors and for the general public. E-mail Olivia at moneyharmony@cs.com.
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